The Hindu Business Line : Govt raises sugarcane crop estimate

The statistical disaster vis-à-vis sugarcane is similar in consequence to what happened to wheat in 2005-06. 2006-07 size projected up by 32 m tonnes

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New Delhi Feb. 6 If there is one instance of wrong official forecasts influencing major policy decisions, right or wrong, here it is.

In its "first advance estimates" of crop production for 2006-07 released on September 15, the Agriculture Ministry had projected the country's sugarcane production at 283.40 million tonnes ( mt). This was marginally higher than the 278.39 mt of 2005-06 (as per the `fourth advance estimate' for that year).

But now, going by the "second advance estimate" released on Tuesday, the 2006-07 crop size has been put at 315.53 mt. This marks a massive, indeed unprecedented, upward revision of over 32 mt — all in a matter of less than five months!

Upward revisions

Simultaneously, the 2005-06 output figure of 278.39 mt (`fourth advance estimate') is reckoned higher at 281.17 mt in the `final estimate', having previously been assessed at 257.72 mt and 266.88 mt in the `first' and `second' advance estimates, respectively for that year.

Such huge upward revisions — 23 mt-plus in 2005-06 and 32 mt-plus in 2006-07 — would have had little impact if they were mere grist for the obsessive number-cruncher or record mill.

In this case, they have proved to be much more than that only because it shows how the Ministry has all through been underestimating the country's cane production. And that, in turn, was a major factor behind the Centre's decision to ban sugar exports in July and persist with it right until January. The adverse effect of this move on the sugar industry and cane growers — in terms of loss of export business at a crucial period when international prices ruled high — is too well known.

The statistical disaster vis-à-vis sugarcane is similar in consequence to what happened to wheat in 2005-06. In that case, the Ministry, against all evidence on the field, projected an output of 73.06 mt in its `second advance estimate' of February 22, last year. This figure was revised downwards to 71.54 mt in the `third advance' estimate of May 5, 69.48 mt in the `fourth advance estimate' of July 15 and 69.35 mt in the latest `final estimate'.

The initial overestimation of last year's wheat crop again contributed significantly to the Centre not raising procurement prices adequately at the time of harvest. When it did announce a bonus, the move came late, as by then, the private trade (armed with better market intelligence) had mopped up much of the grain.

So the next time, don't dismiss official data, for even bloomers can prove costly.